The China-Africa connection has been fostered intensely over the last two decades. As reported by Statista’s research expert for Angola, Kenya and Tanzania, Julia Faria:
“African exports to China also increased, though at a slower pace. In 2020, total export value to China reached nearly 62 billion U.S. dollars, a slowdown caused by the Covid-19 pandemic. The growing Chinese demand for raw materials has found a strong supplier in Africa, with exports valued at around 14 billion U.S. dollars in 2020.”
Far beyond being a simple trade relationship, China has been the largest foreign investor in Africa for a number of years now. Additionally, the country was the source of 25 percent of infrastructure funding in the continent in 2018 – the second highest share that year and only second to the financial commitments from national African governments.
If we don’t bother measuring national well-being, the health of the nation’s commons and resources and advances in the public’s interests, then we foolishly call a decade of tremendous advancement “stagflation.”
Correspondent J.D. read The Forgotten History of the 1970s and kindly added a graphic example of the remarkable transformation wrought by the federal Clean Water Act and other environmental regulations mandating the clean-up of the nation’s air and other public “commons”–the nation’s biosphere and resources that we all share as an essential part of the common good and the public trust.
The point of my previous post was to explain that measuring the economy by narrow measures of “growth” and “profits” grossly distorts what’s actually happening and what’s actually valuable–and despite economists’ delusional obsession with “growth” and “profits,” it isn’t “growth” or “profits.”
What’s actually valuable are advances in national well-being and security and the common good. These may be advanced by “growth” and “profits,” but they can also be diminished by “growth” and “profits.”
As Adam Smith took great pains to explain, open-market Capitalism can only function within a moral and ethical social structure. Stripped of moral constraints, “growth” and “profits” become fatal cancers in the economy and society. In and of themselves, “growth” and “profits” have no moral or ethical center; if those benefiting from “growth” and “profits” destroy the public commons and diminish the common good, those costs are ignored.
That’s the problem with proclaiming “markets solve all problems.” They don’t; in fact, left to their no-moral-compass ways, they create horrendous problems for the many subjected to the profiteering of the few, problems that destroy public “commons,” the common good and the public trust.
What better way to foster “growth” and boost “profits” than dump offal and carcasses in the public’s rivers, rather than bear the costs of proper disposal? This is one manifestation of The Tragedy of the Commons, a concept clarified by Garrett Hardin in his seminal 1968 essay of the same name: if a for-profit private enterprise can offload costs of its own production onto the public, that cost savings enables faster growth and higher profits.
But who benefits from this growth and higher profits? The few who own the private enterprise. Who bears the destruction and costs? The public. Laying waste to public resources is the “market solution,” and any corporate manager who dared slash profits and growth to fund proper disposal of offal will be quickly fired and sent to Corporate Siberia, as the howls of outrage from “shareholders” (a.k.a. the top 0.1%) deafen the ears of the management.
This is why America’s air and water became increasingly polluted, unhealthy and ugly: dumping private-sector waste into the nation’s air and water boosted “growth” and “profits.” I’ve put these words in quotes to denote that they aren’t actually expansions of anything remotely beneficial to the national interest or the American public; they were only beneficial to the few who owned and managed the for-profit private enterprises.
There are many ways for-profit private enterprises dump costs onto the public:profits are private but costs are public. Corporations can pay such low wages that their employees need publicly funded food stamps to get by. Financial companies take extraordinary risks to reap immense profits, knowing they’ll get to keep the profits and the Federal Reserve and Treasury will bail them out at the public’s expense.
Stripped of ethics enforced to defend the public’s interests, corporations routinely lie, cheat, defraud and embezzle to boost profits, knowing the fine will be modest: just the cost of boosting profits by any means available. Consider this data base of 6,300 major corporate fines and settlements from the early 1990s to 2015 compiled by Jon Morse. No CEO or other manager paid any personal fines or served any prison time for any of these thousands of violations.
So let’s be clear: the “market solution” without any regulations to defend the public’s interests is rotting carcasses floating in America’s rivers. The public’s interests–the nation’s commons and the common good–are defended by its representational government. To the degree this government is corrupted by private wealth, it fails its sacred duty to defend the public’s interests. When it does its job, then the meaning of growth and profit change.
When the public’s interests are defended, “growth” that benefits the few is redefined as advances in public well-being. “Profit” that benefits the few at the expense of the many is redefined as the public commons and resources profiting from wise management for the good of all rather than the few.
If we don’t bother measuring national well-being, the health of the nation’s commons and resources and advances in the public’s interests, then we foolishly call a decade of tremendous advancement “stagflation.” This “stagflation” was the direct result of the diversion of hundreds of billions of dollars (in today’s money) of private profits and government tax revenues to clean up the wanton destruction of the public commons.
As I pointed out in The Forgotten History of the 1970s, additional vast, sustained investments in re-engineering the nation’s industrial base to become more efficient and globally competitive eventually boosted the economy and private-sector profits.
The point here is structural transformations take time and require immense investments, time and investments that demand sacrifices of everyone–including the top 0.1% and “shareholders.” If we fail to undertake needed transformations, the result is stagnation and a death-spiral down the black hole of sclerosis, corruption, greed and exploitation.
Here are J.D.’s comments and the photos he submitted:
“Your article on the role of 70s rebuild in Stagflation really hit a note with me. I was born in ’58 and watched, and participated in, the transformation. I am a biologist and an environmental engineer and have worked over 34 years for a federal agency in Water Pollution.
You’re right, the unmeasured wealth of a cleaner environment is huge. Allow me a single example. Here in Kansas City, the Kansas River flows into the Missouri River draining a huge watershed. For nearly 100 years the slaughter houses of the “East Bottoms” in KSMO discharged with no treatment into the two rivers. KCMO and KCK had no treatment of municipal waste. The Missouri river was foul and had fish kills.
In the 70s and 80s treatment was brought online. I came on board in ’88 and have contributed to the rest of the work. Last fall we celebrated the 50th anniversary of the Clean Water Act at Kaw Point, where the two rivers meet. Now a park. We showed a picture of the site from the Nov. 1971 issue of National Geographic. Yep, that is blood, floating fat, and a cow carcass.
For the past 15 years I have worked in a 340 mile kayak race (MR340) that starts at the point. We are up to 450 boats now and thousands participate.
KCMO is now building apartments and a huge women’s soccer stadium on the riverfront. None of that would have been considered before.”
Thank you, J.D. for the striking example. Somehow I doubt there would hundreds of kayakers and spectators anxious to participate in the Dead Carcass and Putrid Offal Regatta, nor many buyers for the Stench of Offal Condominiums.
What’s more valuable in the long run? Putrid offal in the river to boost private “profits” by offloading costs onto the public commons, or a clean river? In the long run, the clean river is more valuable by any measure.
Germany Still Years Away From Replacing Russian NatGas, Official Admits To “Unspoken Strategy To Pay Crazy Prices”
Some European politicians and economists are breathing a sigh of relief after mild temperatures, increasing liquefied natural gas shipments, and above-average natural gas stockpiles have so far averted a worsening energy crisis this winter. Other politicians believe the energy crunch won’t be over for many years.
“Gas storage is up and gas prices are down. Inflation is falling and uncertainty is declining,” Deutsche Bank AG wrote in a note this week, adding, “We can afford to be more optimistic.”
As of late, Europe’s biggest economy, Germany, has seen an improvement in business outlook as recession fears recede, according to data from the Ifo Institute, a Munich-based economic researcher.
Ifo President Clemens Fuest told Bloomberg TV:
“The most important risk for the German economy was a gas-rationing scenario … and that risk is off the table now.”
There’s a lot to be happy about in Europe: Dutch front-month NatGas, the continent’s benchmark, slid as much as 5% to 55 euros a megawatt-hour today, the lowest level since late 2021. Prices have collapsed by more than 83% since peaking at 311 euros a megawatt-hour last August.
However, the optimism could be short-lived because Germany is years from entirely substituting Russian NatGas flows with LNG shipments.
Last week, Chancellor Olaf Scholz told Bloomberg that German learned a hard lesson in its addiction for cheap Russian NatGas. He said the country is now rejiggering supply chains that will increase capacity for LNG imports at major ports.
A new report via the country’s Economy Ministry shows Germany will install 56 billion cubic meters of domestic LNG import capacity by 2026. By 2030, capacities will increase to 76.5 billion cubic meters or about 80% of total German NatGas consumption in 2021.
The ministry pointed out that even though current NatGas storage facilities are above normal levels, there are mounting risks later this year that storage could sink to dangerously low levels and result in shortages.
“The truth is, there won’t be enough in the next three to four years of LNG production capacity in the world to meet the growing demand. So the unspoken strategy is that Germany will continue to pay crazy prices and other, less rich countries go empty-handed,” Christian Leye, a Bundestag Left Party representative, told Bloomberg.
Germany has reduced its dependence on Russian NatGas by importing LNG from other EU countries and increasing NatGas pipeline flows from Norway and the Netherlands. Germany didn’t have a choice after explosions rocked Nord Stream last year. An issue we see is that Germany’s NatGas storage was filled last summer when Russian NatGas was still flowing — not so much anymore.
Deutsche Bank expects EU NatGas prices to fluctuate between 50 and 100 euros a megawatt-hour this year. It’s only a matter of time before the temporary relief evaporates and the energy crisis resurfaces.
Some 35,000 PayPal user accounts have been hacked by “credential stuffing,” resulting in exposed names and Social Security numbers, according to a notification posted on a government website.
Through its lawyers, the California-based payment processor sent a notice to Maine’s attorney general. The company also sent a letter, dated Jan. 19, about the data breach to impacted users.
That letter said that the accounts were breached sometime between Dec. 6 and Dec. 8, 2022. The company said that it was able to deal with the attack soon after it occurred, according to the letter.
The notification to users said (pdf) that 34,942 users were impacted by the incident and that unauthorized third parties gained access to their accounts. Those third parties, which were not identified, could view full names, dates of birth, Social Security numbers, addresses, and tax identification numbers.
“We have no information suggesting that any of your personal information was misused as a result of this incident, or that there are any unauthorized transactions on your account,” said PayPal’s letter.
Specifically, the hackers used a “credential stuffing” attack that involves automatically injecting login credentials that were found during previous data breaches.
“If you detect any suspicious activity on an account, change the password and security questions immediately, and promptly notify the company where the account is maintained,” PayPal said. “You may also add additional security for your PayPal account by enabling ‘2-step verification’ in your Account Settings. When links are present in an email, individuals should hover [their] mouse over the links to view the actual destination URL and should not click on the link if [they] are unsure of the destination URL or website.”
Furthermore, the company said it has reset passwords on the afflicted PayPal accounts. Impacted users will also get free identity monitoring services from Equifax, the consumer credit reporting company.
In a statement to PCMag, the company maintained that it was only a “small number of PayPal customer accounts” that were impacted by the breach. The Epoch Times has contacted PayPal for comment. It noted that neither its website nor its systems were hacked.
“PayPal’s payment systems were not impacted, and no financial information was accessed,” the firm said. “We have contacted affected customers directly to provide guidance on this matter to help them further protect their information. The security and privacy of our customers’ account information [remain] a top priority for PayPal, and we sincerely apologize for any inconvenience this may have caused.”
More Details
Sam Curry, the chief security officer at Cybereason, told Forbes magazine that what happened was that previous hacks “led to a large population’s passwords in use elsewhere being stolen, and because people often reuse passwords and have done so for a long time.” Elaborating, he added that “the hackers were able to brute slam PayPal accounts with these until they found 35,000 matches.”
“If a threat actor can access legitimate credentials–even if they’re dumped in a dark-web repository–they are only a few short, and in most cases, automated steps away from a successful intrusion,” Jasson Casey, the chief technology officer at Beyond Identity, told HackRead.
Africa currently has three megacities: Cairo in Egypt, Kinshasa in the Democratic Republic of Congo and Lagos in Nigeria.
But, as Statista’s Anna Fleck details below, by 2050, the continent is set to have four more: Dar es Salaam in Tanzania, Nairobi in Kenya, Khartoum in Sudan and Luanda in Angola. A megacity is an urban center with at least 10 million people living in it.
According to a report by the thinktank Institute for Economics & Peace, Dar es Salaam is expected to see the greatest population growth rate of the listed capitals, skyrocketing some 118 percent from 7.5 million people to 16.4 million by 2050. Nairobi too will see growth of 100 percent, as its population increases from today’s 5.2 million to 10.4 million. In terms of absolute numbers though, Cairo will have the biggest population, with a predicted 32.6 million people, followed by Kinshasa with 29 million and Lagos with 28.2 million.
Megacities are economic powerhouses that can provide new opportunities, jobs and services to millions. From a businesses perspective, they offer a huge labor market and potential consumer base, as well as low transport costs, and are centers of geostrategic importance, making them highly attractive to foreign and local investors. At the same time, when poorly managed, rapid urbanization can place strain on a city’s infrastructure and public facilities as resources once intended for far fewer people are suddenly spread too thin. This includes everything from roads and electricity to schools, medical centers and transport, to housing and waste management, as well as government services such as security and policing.
For cities to grow in a sustainable way, both good city planning and sufficient finances are needed. Without these, cities run the risk of not enough regulations being put in place and corners being cut, for instance when trying to quickly build much-needed housing cheaply. The authors of the report cite how this was the case in Lagos between January and July of 2022, when 24 buildings collapsed.
IEP researchers warn that cities in countries facing water stress, vulnerability to food security, conflict and climate related natural disasters are at particular risk of becoming unsustainable, flagging Kinshasa, Nairobi, and Lagos as among the most extreme examples.
It’s important to note here that different sources cite different statistics, and that especially with forecasts, situations can change. For instance, where the United Nations initially predicted that India would overtake China as the biggest country in 2027, it is now expected to take place in April of this year. In terms of megacity status, according to UN data from 2018, several additional cities, including Kuala Lumpur in Malaysia and Wuhan in China, will make the roundup even by 2035.
Read more on the nature of conflicting reports here.
As of yesterday, a food additive made out of powdered crickets began appearing in foods from pizza, to pasta to cereals across the European Union.
Yes, really.
Defatted house crickets are on the menu for Europeans across the continent, without the vast majority of them knowing it is now in their food.
“This comes thanks to a European Commission ruling passed earlier this month,” reports RT.
“As per the decision, which cited the scientific opinion of the European Food Safety Authority, the additive is safe to use in a whole range of products, including but not limited to cereal bars, biscuits, pizza, pasta-based products, and whey powder.”
But don’t worry, because the crickets first have to be checked to make sure they “discard their bowel content” before being frozen.
Lovely stuff.
Critics suggested that once bugs become widely accepted as a food additive, their consumption will become normalized across the board.
“The Liberal World Order has decided that the little people must eat bugs to prevent the climate from fluctuating, in accordance with ruling class ideology,” writes Dave Blount.
“Yet rather than mindlessly obey The Experts as most did with Covid policy, people have resisted. So our moonbat overlords are furtively sneaking insects into food.”
“This will allow them to reveal in the near future that we have already been eating bugs, so there is no reason to object to them shutting down farms and imposing a new diet.”
The European Union also recently approved the use of Alphitobius diaperinus, otherwise known as the lesser mealworm, for human consumption.
As we have exhaustively documented, globalist technocrats and climate change activists have consistently lobbied for people to start eating bugs to fight global warming, despite the practice being linked to parasitic infections.
I somewhat doubt that elitist technocrats who recently visited Davos will be switching to the bug diet, no matter how much they browbeat us about man-made climate change.
Back in November, the Washington Post advised Americans that instead of a traditional Thanksgiving dinner, which now is unaffordable for a quarter of families, they should instead look to eating bugs.
While livestock farmers in the Netherlands are being climate change regulated out of existence, school children are being indoctrinated to eat bugs, while another German school has banned meat entirely.
Like so many of the evils in our midst, sex trafficking (and the sexualization of young people) is a cultural disease that is rooted in the American police state’s heart of darkness. It speaks to a sordid, far-reaching corruption that stretches from the highest seats of power (governmental and corporate) down to the most hidden corners and relies on our silence and our complicity to turn a blind eye to wrongdoing.
It is estimated that the number of children who are at risk of being trafficked or have already been sold into the sex trade would fill 1300 school buses.
Every year, the ages of the girls and boys being bought and sold get younger and younger.
The average age of those being trafficked is 13. Yet as the head of a group that combats trafficking pointed out, “Let’s think about what average means. That means there are children younger than 13. That means 8-, 9-, 10-year-olds.”
A Pennsylvania police chief and his friend were arrested for allegedly raping a young girl hundreds of times—orally, vaginally, and anally several times a week—over the course of seven years, starting when she was 4 years old.
Two NYPD cops were accused of arresting a teenager, handcuffing her, and driving her in an unmarked van to a nearby parking lot, where they raped her and forced her to perform oral sex on them, then dropped her off on a nearby street corner.
And then you have national sporting events such as the Super Bowl, where sex traffickers have been caught selling minors, some as young as 9 years old. Whether or not the Super Bowl is a “windfall” for sex traffickers as some claim, it remains a lucrative source of income for the child sex trafficking industry and a draw for those who are willing to pay to rape young children.
Social media makes it all too easy. As one news center reported, “Finding girls is easy for pimps. They look on … social networks. They and their assistants cruise malls, high schools and middle schools. They pick them up at bus stops. On the trolley. Girl-to-girl recruitment sometimes happens.” Foster homes and youth shelters have also become prime targets for traffickers.
Rarely do these children enter into prostitution voluntarily. Many start out as runaways or throwaways, only to be snatched up by pimps or larger sex rings. Others, persuaded to meet up with a stranger after interacting online through one of the many social networking sites, find themselves quickly initiated into their new lives as sex slaves.
For those trafficked, it’s a nightmare from beginning to end.
Those being sold for sex have an average life expectancy of seven years, and those years are a living nightmare of endless rape, forced drugging, humiliation, degradation, threats, disease, pregnancies, abortions, miscarriages, torture, pain, and always the constant fear of being killed or, worse, having those you love hurt or killed.
As David McSwane recounts in a chilling piece for the Herald-Tribune: “In Oakland Park, an industrial Fort Lauderdale suburb, federal agents in 2011 encountered a brothel operated by a married couple. Inside ‘The Boom Boom Room,’ as it was known, customers paid a fee and were given a condom and a timer and left alone with one of the brothel’s eight teenagers, children as young as 13. A 16-year-old foster child testified that he acted as security, while a 17-year-old girl told a federal judge she was forced to have sex with as many as 20 men a night.”
One particular sex trafficking ring catered specifically to migrant workers employed seasonally on farms throughout the southeastern states, especially the Carolinas and Georgia, although it’s a flourishing business in every state in the country. Traffickers transport the women from farm to farm, where migrant workers would line up outside shacks, as many as 30 at a time, to have sex with them before they were transported to yet another farm where the process would begin all over again.
This growing evil is, for all intents and purposes, out in the open.
That so many children continue to be victimized, brutalized and treated like human cargo is due to three things: one, a consumer demand that is increasingly lucrative for everyone involved—except the victims; two, a level of corruption so invasive on both a local and international scale that there is little hope of working through established channels for change; and three, an eerie silence from individuals who fail to speak out against such atrocities.
Yuma Arizona ‘On The Brink Of Collapse’ Due To ‘Unprecedented’ Migrant Surge
The border city of Yuma, Arizona is on the ‘brink of collapse’ as a flood of migrants have overloaded hospitals and food banks.
According to officials, some 5 million migrants have crossed into the US since President Biden took office in January 2021.
As a result, Yuma County’s Border Patrol has seen a rise in migrant crossings of 171%. According to County Supervisor Jonathan Lines, the county will ‘crumble’ if it can’t support the flow of migrants. Lines says that the situation will only get worse, according to the Fox News.
In a statement to Fox News, Lines said that “Policies need to be changed when you see an unprecedented amount of people coming across the border that even supersedes what we saw under any of the other presidents for the past 30 years,” adding that the surge in crossings is “ridiculous.”
“They’re coming because they said that Biden told them to come, that we have an open border.”
According to fifth-generation Yuma resident and farmer, Hank Auza, “The problem that we’re foreseeing right now is there’s a couple of big waves coming,” adding “Yuma can’t support that. It will overwhelm the system here.“
El Paso, Texas, another border town, declared a state of emergency as thousands of migrants camped in the streets during below-freezing temperatures in December. Many migrant shelters were over capacity, leading the city to use the local airport for temporary refuge.
Lines, Auza and another Yuma farmer, Alex Muller, had shared concerns, starting with the fear around food security, since agricultural production makes up a large part of the town’s economy.
“Our fields are monitored and audited and tested for different pathogens,” Muller, said. “You can’t have people walking through the field.”
Auza said Yuma’s fields, which produce 93% of the nation’s leafy greens in the winter months, have faced a fair amount of migrant traffic, risking damage to their crops due to foodborne illness concerns. He also said many residents can’t get into the city’s only hospital. -Fox News
“People have had a hard time getting into the hospital because the hospital has been so full of” migrants, said Auza.
The movie The Big Short is about the housing crisis and its collapse, along with all the fraudulent activity up and down the financial system that abetted it. It is as much a cultural story as it is one about finance, a film about what banking corruption does to human beings and the law itself. In it, there’s a famous scene where fund investors betting on a housing collapse are trying to learn about the Florida housing market, and are interviewing some frat-boy type Florida real estate agents. The agents keep discussing their self-serving and illegal behavior, like falsifying paperwork or selling to people who knowingly can’t pay back loans. At a certain point, the main character asks his colleagues, ‘why are they confessing?’ to which the others respond, “they’re not confessing, they’re bragging.”
The point of this scene is to show that people in the industry during the housing bubble weren’t just breaking the law, but saw the law itself as irrelevant. Enforcement was so weak that those in finance and real estate would just openly brag about all the crime they were doing.
It was a true story. And it continues to be a true story in most white collar areas.
Late last year, the CEO of Equifax Mark Begor presented at a Goldman Sachs conference for investors, and openly told the investors how much market power his firm has in the business of selling income verification services to creditors. “We have meaningful pricing power,” he said, because “only Equifax has that income and employment data.” Equifax aggressively raises prices on the Work Number product line annually, and has, according to Begor, “already got our January 1, 2023 price increases in the market.” Long term, he says, “we have an ability to grow price well in excess of GDP.” This is fairly shocking stuff from a CEO, who should know better than to confess to monopolization. Only, it seems as if Begor wasn’t confessing, he was bragging.
Here’s the audio.
Still, why wouldn’t Begor brag to investors? Equifax’s controversial behavior is near-legendary. The firm is an important credit bureau, and credit data is exactly what we wouldn’t want to fall into the hands of hackers, who could then easily use it to engage in identity theft, en masse. But in 2017, Equifax had a massive scandal, one of the biggest data breaches in history, when it accidentally exposed the personal data of 147 million people. The Federal Trade Commission fined the company more than $575 million, and the CEO, CIO, and chief security officer were all forced out.
Yet the firm didn’t suffer any long-term reputation damage. And in all the hoopla around the scandal, there really wasn’t a lot of discussion about why that is, and how Equifax actually makes money. So looking at Begor’s braggadocio around the firm’s market power is useful. The product Begor told investors about at the Goldman Sachs confab is called The Work Number, which is a business line that bundles data about the incomes of hundreds of millions of people and sells it to interested parties, like lenders, landlords, employers, and government agencies. Payroll and data is by some estimates a $10 billion market, and now brings in a majority of the firm’s domestic revenue.
Equifax used to be a firm, which, along with Experian and TransUnion, focused on keeps tabs on all of us and whether we pay our debts. But over the last four years, it has transformed itself into a sort of tax information agency, which sells information about our salary and income to third parties. It’s a better business than just credit data, because while three firms have information about whether you pay back your credit card company, only Equifax has complete information about where you work. And a monopoly, as Begor bragged, is better than an oligopoly.
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The Work Number
First let’s start with why this business exists. Sharing information about where you work and what you make is something we all need to do on occasion. If a bank or auto dealer wants to lend someone money to buy a home or car, they need a verification that the person works where he says he works and makes the income he says he makes. Sometimes a potential employer or landlord needs to check work history, or a public agency needs to ensure someone qualifies for government assistance, or they have to update immigration status.
How do third parties verify this information? Employers don’t like it when their HR departments are getting constant requests from lenders about their employees and what they make. And getting this information from the IRS is illegal (or least has been since progressives in the 1920s temporarily had tax returns made public.) So for decades, employers have been sending data on this to brokers, who sell the records to interested parties. Today, the biggest and in some ways only meaningful broker in this space is Equifax. If you are trying to find out someone’s work history and income, it’s pretty likely Equifax has it, and it’s unlikely anyone else does. (Experian is the second player in the market, but they just started their product line in 2021, and as I’ll explain, they are far behind.) And we’re not just talking about the data the IRS has, we’re talking about data on pay for every payroll cycle, your overtime amount, the start and end date for your job, your title, your health care provider, whether you have dental insurance, and if you’ve ever filed an unemployment claim.
There are network effects in this business; the more data Equifax gets from employers, the more likely it is to be the place lenders and government agencies seek to do income verification. In addition, having lots of data about workers also allows Equifax to build services for firms, such as managing unemployment compensation. When a firm lays off a worker, that worker is supposed to have rights to unemployment compensation, which the firm has to pay for. But if that employee was fired for cause, or quit, then that worker isn’t entitled to unemployment payments, and the firm is off the hook. There are lots of grey areas here, it’s a quasi-legal setup between the state, the business, and the employee. Managing this process, along with appeals, is also something Equifax does, as it’s a natural extension of its data business.
Because of this extensive warehouse of data and set of services, firms and agencies then integrate themselves into the Work Number. So one could argue this business has natural barriers to entry. But the story here isn’t just one of scale efficiencies. The Work Number is a legacy business, started decades ago. With the internet, however, there’s no technical reason for a centralized repository of employment and verification data, or at least not the way it’s set up today. It’s quite possible to set up a system allowing any verifier to ask the individual for his or her records. But that would cut against Equifax’s business model, which involves not only taking your data without you knowing about it and selling it, but also, crucially, preventing any other third party from innovating to build a more privacy-safe version of the same service.
Indeed, the story here is monopolization. Fifteen years ago, Equifax had already run into the Federal Trade commission, not for privacy violations, but for antitrust violations. Only, because its income verification business was a sideshow to its main credit reporting revenue line, people didn’t really notice. Today, however, Equifax is now a monopoly income verifier with a side credit information business.
The original Work Number product came from a company called TALX Corporation, which was founded in the 1970s and that Equifax bought in 2007. From 2002-2005, TALX had bought up seven rivals, consolidating the verification of income and employment business. Immediately after this acquisition spree, TALX raised prices and forced customers to move from buying annually to signing long-term multi-year contracts. Additionally, TALX had non-competes and non-solicitation agreements with its employees, which further locked up the market.
In 2008, the Bush administration FTC sued Equifax over acquisitions and unfair methods of competition. It was a creative complaint, with the Chair of the commission – Bill Kovacic – looking skeptically at a series of small acquisitions, instead of one big one. But the FTC didn’t seek to undo any of the mergers. Instead, it signed a consent decree forcing TALX, now Equifax, to let customers out of long-term contracts and employees out of non-compete agreements. These consent decree obligations ended in 2017. Ultimately, this FTC action, because it didn’t require a break-up, didn’t restore competition in the market, allowing Equifax to fortify its monopoly. Equifax’s TALX subsidiary was even caught for violating of the Fair Credit Reporting Act just two years later. And the company is still a merger machine, purchasing small and large firms nearly every year. For instance, just in 2021, it made $3 billion in acquisitions, buying HIREtech and i2Verify.
After the consent decree ended, the exclusive arrangements came back. ADP, Intuit, Paycor, PrismHR, Rippling, and many other providers of outsourced payroll services have deals with Equifax to turn over or sell records. So do large companies. In 2017, Joel Winston at Fast Company reported that “75% of the Fortune 500 companies, 85% of the federal government workforce, entire state governments and agencies, courts, colleges, and thousands of small businesses nationwide” handed over data. Facebook, Amazon, Oracle, Google, Wal-Mart, Twitter, AT&T, Harvard Law School, and the Commonwealth of Pennsylvania do too. The number of entities handing over this data has only gone up since then.
And Equifax pays many of these entities for their employee data, turning human resources into a revenue generator. Of course, the employees don’t know their own data is being sold by their employer, and even small businesses who use payroll services like ADP don’t realize their data is being sold. (Small businesses can opt-out, but they have to tell their payroll provider.)
The net effect of these arrangements is that smaller players in the market, such as ExperianVerify, Truework, Thomas & Company, and Certree, simply cannot get the data that Equifax has. They are boxed out. If you are doing income verification, and you put someone’s Social Security number into Equifax, you have a 50-70% chance of getting a successful conversion. For other brokers, it’s much lower. There isn’t so much a market for employer/income verification information, there’s a market for information about each specific person. To a lender, it doesn’t matter if a rival to Equifax has information on 30% of the country, it matters if that rival has information on the individual to whom they are considering loaning money. If they don’t, you have to use Equifax.
On the other side, Equifax has also erected barriers to entry. If you are a frequent buyer of income and employment data, Equifax sometimes offers a loyalty discount if you move all your business to the Work Number. One background check provider, SwiftCheck, explained Equifax offered that “if our organization performs The Work Number Verification on every employment verification, a discount is offered.” This is a classic loyalty discount, what looks like an unlawful mechanism to exclude competitors.
So that’s how Equifax establishes its market power, by blocking rivals from getting data and by locking in customers of that data. And we can see this market power at work in the pricing, as their CEO noted in December. Equifax has been raising prices substantially for years. How much? Well like an airline or any firm with market power, Equifax doesn’t just have one price. It can engage in price discrimination depending on the willingness to pay. But the price hikes that are public, are extreme. In 2017, the price for a record was $20, in 2020 it was $41.95. Today, it lists its price as $54.95 for a record of where you currently work, and potentially up to $200 for records with more historical information. And it’ll keep going up.
The Real Cost: Equifax as Private Government
Consumers pay for this cost in ways they don’t see. When you get a loan or rent an apartment, the lender or landlord has to pay Equifax’s toll, and will include that extra cost in the price of your loan or rent. But more than just higher prices, Equifax’s database is powerful. The Work Number can, according to the government, help determine “an applicant’s social service eligibility” or “inform child support collections and enforcement.”
There are often errors, and getting your own data from Equifax can be difficult if not maddening. Just read this thread of frustrated consumers trying to do so, and often encountering mistakes in the process. And as we know, Equifax is prone to hacking. People don’t know that their employment data is being sold to Equifax, and they tend to be upset when they find out. Google workers were outraged about it, which is ironic. It’s also prone to abuse; Apple told the Work Number that every worker who left was automatically given the title “associate,” regardless of whether they were a top engineer. According to one former Apple worker, this error “delayed the hiring process at a prospective employer by nearly a week, during which time the company rescinded the offer.” I don’t tend to focus on privacy, but though Equifax claims there are controls on who can buy this information, security researcher Brian Krebs noted in 2017, that it’s easy for pretty much anyone to learn your salary. These flaws are all quality harms, standard for any monopolist who isn’t subject to competition.
The Work Number is so important that Equifax is engaged in the work that should be reserved to a government. Generally speaking, people would get really upset if the IRS shared our tax information for a fee. Effectively, Equifax is doing that, because for most people, employment and income is our tax information. But since it’s a private monopoly, the anti-government types don’t notice or care. At the height of the Great Recession in 2010, Equifax’s TALX division was processing 30% of the unemployment claims in the country. Though originally intended to automate the process, what Equifax ended up doing was automating the refusal to pay out unemployment claims. It systemically denied applications regardless of merit so its clients – employers – would have to pay less in unemployment taxes. And this goal is on the firm’s investment documents, which uses the anodyne wording of “reduce the cost of unemployment claims through effective claims representation” to describe the service it provides to employers who give it data.
It’s perhaps no exaggeration to note that Equifax is a quasi-governmental agency, a monopoly provider of evidence that you work, where you work, and what you make. If there’s an error, or if someone lies about you, too bad. If Equifax itself is paid to harm you, too bad. If a government agency gets the wrong data and denies you assistance or screws up your immigration status, that’s on you, well, you have limited to no rights in this situation. In some ways, you might have more to fear from Equifax than the IRS.
It Need Not Be This Way
As is always the case, most things created by people can be unmade by people. And so too with Equifax. I learned about the Work Number from a contact on Wall Street who pays attention to monopolies. He told me the Work Number is one of the purest examples of market power he’s seen, which of course, the CEO of Equifax helpfully confirmed in public. I’ve also talked to a number of people in the industry trying to compete in the payroll data space. Two firms – Certree and Argyle – recently sent letters to the Federal Trade Commission asking for an investigation into this market, pointing at the abuse of consumers by Equifax (and to a lesser extent Experian).
The strategies for each small rival are different, but both give the consumer control over who can access their data, instead of building a giant centralized repository controlled by a monopolist. Certree gives each employee a ‘personal vault’ where his or her data resides. While they verify that the data came from an employer, only the employee can give permission for a third party to look at what’s inside – even Certree can’t see it. Certree is paid when a lender or third party successfully verifies an employment or income record.
Argyle has a totally different model. It isn’t even a data broker, but a ‘data transfer agent.’ It lets third parties ask consumers about their income and employment information by sending them a link, and then gets consumers to give them their passwords for their employment information. Argyle doesn’t keep any data on hand, but is controversial because it engages in screen-scraping of your employer’s website, which can be a security risk. And yet it is weird to think it’s problematic for employees to take their own data from their employer, but fine for employers to sell that data to Equifax.
Both Certree and Argyle charge much less than Equifax for their service.
Regardless, the overall point is that having a centralized data broker that has a quasi-monopoly over income and verification data, and sits largely unregulated, is ridiculous. Breaking up Equifax’s monopoly wouldn’t be that hard, at least conceptually. Many of the practices that it engages in today are things the FTC banned in its old consent decree with the firm. And it’s obvious that Equifax is immune to competitive forces. Despite the price hikes and devastating and routine news stories about hacks, errors and problems, as well as public polling showing increasing concerns over privacy, Equifax marches on, unbothered and unchastened. That’s the classic monopoly position, a recognition that there is no alternative.
Beyond the monopoly problem, however, why not have a system where individuals control their own data? Prior to the internet this would have been impossible, but today it’s quite doable. Giving individual control over their data would probably require both antitrust law and an aggressive reading of the Consumer Financial Protection Bureau’s authority over Credit Reporting Agencies, or a new Congressional statute for ownership and control of employment data.
Regardless, I’d like to thank Equifax CEO Mark Begor for bragging last month about his firm’s market power. Without that, I never would have taken the time to learn why Equifax can act as a private IRS, put out a middle finger to each one of us, and collect our money regardless.
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White House Roils Housing Industry Over New Tenant Protections
The housing industry is up in arms over new tenant protections that the Biden administration administration is preparing to roll out as soon as this month, Politicoreports.
The protections, which come as rents around the country are falling, could include promoting grace periods for late rents, as well as giving renters who are facing eviction the right to legal counsel, according to advocates.
According to Jerry Howard, CEO of the National Association of Home Builders, the industry is bracing for “some pretty intense regulation.”
“They need to be very cautious about what they’re doing,” he added, having attended a November White House meeting on tenant protections. “There’s a real chance of creating a problem that doesn’t exist.”
With a possible recession looming, the Biden administration will be looking for ways to provide relief to cash-strapped Americans suffering from a higher cost of living. Since the U.S. House is now under Republican control, the kind of sweeping economic legislation enacted during the last two years is off the table.
Democratic lawmakers including Sen. Elizabeth Warren (D-Mass.), are leaning on the administration to go big by curbing rent increases at millions of units in properties with government-backed mortgages – a long-shot move the White House is not seriously weighing, according to a person with knowledge of the discussions. -Politico
The National Apartment Association and 10 other industry groups are lobbying the White House to resist pressure to enact new federal requirements on top of existing laws – insisting in a December letter that doing so would “further exacerbate affordability challenges.”
“People can’t afford to live,” said Rep Jamaal Bowman (D-NY). “We want to push the president as far as possible to lighten the burden of rent on everyday people.”
Democrats are pushing the Biden administration to enact restrictions on rent hikes and punish landlords who they say are price gouging.
“[N]ot just principles, not just guidelines, but what can the president do through executive action to lighten the burden on people and put more money in their pockets,” Bowman told Politico in an interview.
The White House, meanwhile, appears to be in agreement – though it has yet to comment on specifics.
“We are exploring a broad set of administrative actions that further our commitment to ensuring a fair and affordable market for renters across the nation,” according to spokesperson Robyn Patterson. “We look forward to continuing to work with lawmakers to strengthen tenant protections and improve rental affordability.”
While rent is still driving up overall inflation — thanks in part to a data lag in the official inflation gauge — the national median rent has fallen for four straight months, according to the latest data from Apartment List. New lease demand plummeted in the second half of 2022, when the net demand for apartments fell into negative territory for the first time since 2009, according to an analysis by RealPage Market Analytics. -Politrico
“Complicating this process isn’t good at any time in the market cycle,” said Greg Brown, senior VP of government affairs at the National Apartment Association. “But we’re in the fourth straight month of rent declines. I think things are adjusting again, so it does raise the question, are they responding to a situation of three to four months ago, not what is currently happening or will be happening in the near future?“
